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Friday, March 26, 2010

A Tale of Two 401k Providers: Fidelity and Putnam

Reported by Sean Hanna, Editor in Chief

The 401k Round Up is a weekly column aimed at keeping mutual fund industry insiders updated on what's happening in the 401(k) industry. Below are quick takes on stories that originally appeared on The MFWire's sister publication, The 401kWire.

It was the spring of hope, it was the winter of despair. The words may be those Dickens used to describe Paris, but they resonate today in the world's mutual fund of Boston. Just check the headlines from our sister-publication The 401kWire.com that ran this week:

  • A Private Equity Shop is Moving its $420 Million Plan

  • Fidelity Loses a Fortune 50 Plan Sponsor

    The second story underscores what could be seen as a cause for despair for some in Boston. Fidelity lost another of its marquee plan sponsor clients (United Technologies in this case) to Hewitt Associates. The move is something of a turnabout for both firms.

    At one point in recent years, the gap between 401(k) client wins at Hewitt was measured in years. The DC plan recordkeeper appears to have fixed its issues and is now again winning business.

    Meanwhile, there has been a similar turnabout at the Boston Behemoth. In the not very recent past, it was nearly unheard of for Fidelity to lose a plan sponsor in the mega market. That has been changing. Fidelity's loss of United Technologies is the latest in a string of high profile losses over the past 24 months. That string includes the loss of Ford Motors to ACS' retirement business and Apple to Charles Schwab Retirement Plan Services. Partially offsetting the losses was a win of General Electric's plan at the start of the year.

    In fact, Fidelity's Workplace Investing chief Jim McDonald revealed earlier in March that the division had added 300,000 new participants from Fortune 100 firms and that the business has "strong momentum."

    The takeaway remains, though, that Fidelity is no longer a one-way door through which defined contribution plan sponsors enter and never leave. Those issues extend all the way into the advisor-sold market as judged by the scuttlebutt at last week's ASPPA 401(k) conference in Orlando.

    "It is a shark feeding-frenzy," said one leading retirement advisor when commenting on other providers seeking to win the business of his plan sponsors that are now with Fidelity. That advisor said the openness of his clients listening to offers from Fidelity rivals is unprecedented in his experience in the business.

    That development should hearten the subject of the first headline of the two we started with. The 401kWire reported this week that Putnam Investments has won the 401(k) plan of The Gores Group -- a Los Angeles, California-based private equity firm -- from Mercer.

    Interestingly enough, Putnam is headed by a team of former Fidelity executives including Bob Reynolds and Jeff Carney. Ed Murphy, who heads Putnam's defined contribution business is also from Fidelity, as is DC sales chief Ben Lewis.

    The Gores Group win is the second recent takedown for the Putnam crew. In January, Putnam landed Societe Generale's DC plan from ING Retirement.

    Putnam is using the proprietary Fascore platform owned by its sister-company Great-West Retirement to administer the new wins. That platform handles plans of all sizes from the small-market through to the mega-market, which could open doors to Reynold's Putnam that he previously worked when he headed Fidelity's business.

    In January, Putnam also took the wraps off a new participant Web site that interfaces with the Fascore platform to easily allow savers to reallocate their funds in Putnam plans. It also redefines the accepted Web interface to focus participants on creating retirement income rather than just today's bottom line on their account balance.

    Reynolds told The MFWire that he ordered the redesign of the Website to put a new face on the Fascore system. He expects that interface, and the focus on providing retirement income, to open doors with plan sponsors and spark conversations about what they need to accomplish with their plans. Once those doors are open, Reynolds expects Putnam to be in the mix in winning the sponsor's business.

    Reynolds also remains ambitious. Not only is he targeting the clients of his old employers on Devonshire Street, he ticked off a number of vendors whose clients may be in play after the toll taken by the recent recession on both account balances and client services.

    Fidelity. Charles Schwab. BofA Merrill Lynch. JP Morgan. ACS. And, yes, this week's winner Hewitt are all in his sights.  

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